No fuel price control yet

October 16, 2008

Shares

By Evelyn Njoroge, NAIROBI, October 16 – Kenyans will have to wait a while longer before the government can re- introduce fuel price controls in the market.

The Energy Regulatory Commission (ERC) said on Thursday that it was working on a proposal on regulating the market, which would then be forwarded to the Energy Ministry for consideration and implementation.

“When the model is ready, we shall expose it to the public, hold workshops to discuss it and work with the Attorney General’s office before making the recommendations to the Minister,” explained ERC Director-General Engineer Kaburu Mwirichia.

If approved, the controls would become the secondary legislation out of the Energy Act 2006.

At a media briefing Mr Mwirichia said if re-introduced, the price controls would be done cautiously and would be based on international best practises.

Majority of African countries employ the measures and controls of the retail fuel prices.

The reluctance of many oil firms operating locally to adjust their pump prices to reflect the costs in the international arena has forced the government to consider regulating the market. This is despite acknowledging that price controls are time consuming and tedious to execute.

The situation is no different even as the international crude prices have fallen from a high of $147 per barrel in July to about $68 per barrel as at Thursday. Locally however, the prices are still stuck at an average of Sh99 per litre of premium petrol.

Mr Mwirichia promised to release a comprehensive report of how much pump prices should currently be retailing.

“We will continue to inform the public of where the levels should be as the international prices come down in order to create awareness,” he disclosed.

On the electricity front, Mwirichia added that consumers should also expect another component called inflation adjustment to be reflected in their bills soon.

There would be a formula for working out the adjustment cost, which would be done every six months.

“The formula will involve taking a portion of the underlying inflation, which is used to work out the charges. It is not a major issue; it’s but an issue of ensuring that the utilities firms remain competitive,” he assured responding to whether the component would resort to additional costs for the consumer.

The retail structure of a bill is composed of charges such as fixed, capacity and energy costs and other pass through elements such as fuel costs, forex and the new addition inflation adjustment.